China’s exports surge, boosting trade surplus

ChrisOliver

V.Phani Kumar

HONG KONG (MarketWatch) — China’s exports surged in December, blowing away analysts’ expectations, while credit data also showed some bright spots. But some analysts doubted the improvements could carry through into the new year.

China’s December exports jumped 14.1% from a year earlier, up from a 2.9% gain in November, while imports were up 6%, following on from zero growth the previous month, according to data released Thursday by the General Administration of Customs.

The blockbuster pickup in shipments helped widen the trade surplus to $31.6 billion in December, trouncing estimates and ballooning sharply from a $19.6 billion surplus in November.

Economists polled by Dow Jones Newswires had estimated a trade surplus of $19.6 billion, on export growth of 4.6% and import gains of 3.3%.

‘We shall not extrapolate too much from it, as it’s well known that monthly year-on-year changes of trade data are volatile.’
Bank of America-Merrill Lynch analyst Ting Lu

Bank of America-Merrill Lynch said their own estimates for the December trade were wide off the mark. They noted shipments to the U.S. leapt 9.6% on year, while those to the euro zone edged up 1.9%, reversing from shrinking trade conditions in November, when the value of shipments contracted 2.6% and 18%, respectively.

“That said, we shall not extrapolate too much from it, as it’s well known that monthly year-on-year changes of trade data are volatile,” Lu said.

Lu also cautioned of distortions related to a strike by California port workers last year, with the result that some shipments were delayed from November and rebooked in December, leading to a falsely inflated data set.

Economists at IHS Global Insight also expressed doubts that the December momentum would extend into 2013.

“The volatility of the trade data over the past year, especially in the second half, points to weak fundamentals on the demand side, as also evidenced by the prominence of short-term exports orders,” IHS analysts said in a note following the data.

“Further, we understand there has been a notable amount of rushed shipments and even faked exports to secure tax refunds. This will die down in the new year,” they said.

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IHS added that a more accurate indicator of global demand could be seen in purchasing orders placed at last autumn’s Canton Fair, which were down around 9% from a year earlier.

“With our projection for continued contraction in the euro zone and continued slowdown in the U.S. economy, we believe China’s export sector will face another uphill battle this year — an even tougher one than 2012,” IHS said.

Credit picture more mixed

On a slightly downbeat note, Chinese banks issued 454 billion yuan ($72.9 billion) in new loans during December, short of expectations for 550 billion yuan, and down from the 523 billion yuan in new loans in November, according to data released by the People’s Bank of China.

However a broader measure of credit growth — known as total social financing — maintain its strong growth, rising 20% to 1.6 trillion yuan in December after November’s 20.2% rise.

Analysts said the gauge showed credit growth remained robust, and in fact, conditions were so loose that a relative tightening could be expected in the coming months.

“These data suggest monetary policy remained quite loose in December, but we expect the stance to tighten gradually in 2013, as regulators tighten controls on shadow-banking activities and bond issuance,” Nomura economist Zhiwei Zhang said in a note following the data release.

Zhang said credit appears to have peaked in the July-to-September quarter, when it rose 93% from year earlier.

It has since cooled to a 33% year-on-year increase in the October-to-December period, and Nomura forecasts a further slowdown, eventually stabilizing at about 20% growth for 2013.

Chinese stocks jumped following the data release, with the Hang Seng Index
HSI, +0.18%
trading 0.9% higher in the early afternoon, while the Shanghai Composite Index
000001, +0.57%
tacked on 0.5%.

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